Intel Eyes the Future With New Family of Xeon Server Chips

Intel just unveiled its Xeon Scalable line, a new generation of 58 processors designed for “secure, agile, multi-cloud data centers.” Priced from $200 to $10,000 each, this array of new chips should serve as a clear message to would-be competitors that Intel plans to continue its dominance in the data-center market segment, which offers better profit margins than chips for PCs. Threatening Intel’s leadership are companies creating specialized chips aimed at maximizing performance of artificial intelligence programs.

The Wall Street Journal reports that Intel’s “server-chip division reported an operating-profit margin of 44 percent in fiscal 2016 compared with 32 percent in the segment that sells PC chips.” The server segment has gained more importance since PC sales have been flat.

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According to Mercury Research, “Intel holds nearly 100 percent of the $16.5 billion global market for server chips that run the software instructions called x86 that form the foundation of nearly all commercial software.”

Bernstein Research analyst Stacy Rasgon reports that, in coming years, half of Intel’s expected “double-digit revenue growth in its data-center division … will come not from chips but from ancillary products like storage and networking.” Intel’s competitors include Advanced Micro Devices (AMD), which is now shipping its lower priced Epyc line of server chips.

Qualcomm and Cavium have also demonstrated chips based on technology from SoftBank Group division ARM Holdings. IBM has also announced new server chips, and Nvidia’s graphics processors are enjoying a sales uptick due to “the boom in artificial intelligence.”

The New York Times reports that, “specialized chips [as opposed to Intel’s general-purpose chips] are delivering better performance on artificial intelligence programs that identify images, recognize speech and translate languages.” Intel’s success with the new Xeon family “will be crucial not only for the company but also for the long-term future of the computer chip industry.”

Rasgon notes that Intel is “late to artificial intelligence,” although Intel chief executive Brian Krzanich wrote in a blog post that the company is “uniquely capable of enabling and accelerating the promise of AI.”

Last year, Intel acquired AI startup Nervana Systems for more than $400 million and created an AI group headed by its founder/former chief executive Naveen Rao. Nervana technology is reportedly being integrated into a future Xeon processor code-named Knight’s Crest. A chip code-named Lake Crest that is tailored to run neural networks will also be “available to some customers this year.”